DECISION OF CHILD SUPPORT COMMISSIONER

Decision

1.	The decision of an appeal tribunal held in Glasgow on 14 September 2007 (the tribunal) is not in error of law.  Therefore, the tribunal’s decision stands.

The main issue

2.	This is whether the child support legislation permits a loss from the appellant’s self‑employment as a travel agent to be offset against his occupational pension when determining his liability for child support maintenance.  It was the tribunal’s decision that it did not.

Legislation

3.	The Child Support Act of 1991 (the 1991 Act) was amended by the Child Support, Pensions and Social Security Act 2000, in order to introduce a new scheme.  Currently both old and new schemes operate but the appellant is subject to the new scheme.  There is in fact no material difference between the two schemes with respect to the issue in dispute.

4.	Paragraph 10(1) of Schedule 1 to the 1991 Act provides:

“For the purposes of this Schedule, net weekly income is to be determined in such manner as is provided for in regulations”.

5.	The relevant regulations are the Child Support (Maintenance Calculations and Special Cases) Regulations 2000 (SI 2001/155) (the regulations).  Under paragraph 1 of the Schedule to the regulations (the Schedule):

“Net weekly income means the aggregate of the net weekly income of the non‑resident parent provided for in this Schedule”.

The appellant is the non-resident parent in the present appeal because, under section 3 of the 1991 Act, that is how a parent, who is not living in the same household with the relevant child, is defined.  It is not used in any pejorative sense but merely descriptive of a factual situation.

6.	Part II of the Schedule sets out how the net weekly income of an employed earner is to be calculated.  Earnings in this context means “any remuneration or profit derived from … employment” (see paragraph 4(1)).  Paragraph 4(1) further sets out the kinds of payment that are included as such earnings and, under paragraph 4(2), is listed what is not so included.  Paragraph 5 of the Schedule then sets out the deductions to be taken from such gross earnings in order to calculate net income.  Basically, these deductions are income tax, national insurance contributions and most contributions made to an occupational or personal pension scheme.

7.	Part III of the Schedule deals with the self-employed earner.  Under paragraph 7(1), the net weekly income of a non-resident parent as a self-employed earner are his gross earnings subject to deductions which mirror those for the employed earner under paragraph 5 as referred to above.  Where gross earnings are calculated by using gross receipts subject to allowable expenses, paragraph 8(2) and (3)(a) enumerate what are those allowable expenses.

8.	Then paragraph 8(3)(b) of the Schedule sets out what are not to be included as relevant expenses which may be deducted from the gross receipts to calculate net earnings.  Under paragraph 8(3)(b)(vii), one of such non-deductible expenses is the following:

“any loss incurred in any other employment in which he is engaged as a self‑employed earner”.  

9.	Part IV concerns tax credits and then Part V covers “other income”.  The provisions directly applicable to the appellant’s occupational pension are these:

	“Amount

14.  The amount of other income to be taken into account in calculating or estimating net weekly income shall be the aggregate of the payments to which paragraph 15 applies, net of any income tax deducted and otherwise determined in accordance with this Part.

Types

15.  This paragraph applies to any periodic payment of pension or other benefit under an occupational or personal pension scheme or a retirement annuity contract or such other scheme for the provision of income in a retirement whether or not approved by the Inland Revenue”.

Oral hearing

10.	The case came before me for an oral hearing at the appellant’s request on 3 June 2008.  The appellant attended and presented his own case.  The Secretary of State was represented by Mr Brodie, Advocate, instructed by Miss McCurry, Solicitor, of the Office of the Solicitor to the Advocate General.  The parent with care did not attend.  I am grateful both to the appellant and to Mr Brodie for their courteous and helpful submissions.  What follows refers to their arguments only insofar as is necessary to explain my reasoning.  This in no way means that all their points made have not been taken into account.  

My conclusion and reasons

Reading the statutory provisions for calculating net income as a whole

11.	The primary argument for the appellant is that the only express rule in the legislation, about offsetting a loss from self-employment, is paragraph 8(3)(b)(vii), which prevents offset between two or more self-employments;  and that it is, therefore, logical to imply from this lack of any other such preclusive provision, that there is a general rule that offsetting is otherwise permissible.  However, I agree with Mr Brodie’s contrary submission that, from the whole terms of the Schedule, no such implication arises.

12.	Firstly, unlike income tax law, which positively requires losses from self-employment to be offset against a taxpayer’s other income, there is not one single provision in the Schedule which allows such an offset.  This is against a background, moreover, where Parts of the Schedule, dealing with different kinds of income, make very specific provision in every appropriate case for allowable deductions.  Moreover, the offsetting position is not the only instance where child support and income tax rules diverge;  another example is the treatment of the depreciation of capital assets.

13.	Secondly, given the specific provision that one cannot offset the loss of one business from another business, it would be anomalous if one could nevertheless offset such a loss from employed earnings or, as here, from other income such as a pension.  There is nothing in any way rational which could support such a distinction, but it is what making the implication advanced on behalf of the appellant would involve.

14.	Thirdly, the starting point must be paragraph 10 of Schedule 1 to the 1991 Act which provides that income is to be determined in such manner “as is provided for in regulations”.  The Schedule to the regulations then sets out the applicable code and the relevant provisions are as set out above under my paragraphs 5 to 9.  In my judgement, in the absence of any express provision permitting an offset in any general or particular circumstances, the whole tenor of the Schedule militates against a conclusion that there is any necessary implication of such a rule.  Because in one kind of case, (that under paragraph 8(3)(b)(vii)), it was felt necessary to enact that there could be no such offsetting, in no way suggests that, outwith those circumstances, such an offset is permitted.

15.	I have thus come to the same conclusion as that of the then Chief Commissioner of Northern Ireland in R 1/96 (CSC).  He decided that one could not offset a trading loss incurred in a business against employed earnings, but there can be no reason to treat earnings and pension differently given the terms of paragraph 1 of the Schedule, (as set out above at my paragraph 5).  The relevant provisions are identical in both Northern Ireland and in Great Britain so that, although Commissioners in Great Britain are not bound by decisions of Commissioners in Northern Ireland, it is preferable that such provisions should be interpreted uniformly.  However, as Mr Brodie concedes, Chief Commissioner Chambers reaches his conclusion with reference to little in the way of articulated reasons.  I have, therefore, preferred to reach the same decision by basing myself squarely on the statutory provisions and without relying on R 1/96 (CSC).

Summary

16.	Thus, the tribunal did not err in law.  It was correct that there should be no offset, against the appellant’s income by way of occupational pension, in order to take account of his separate losses in his business as a travel agent.  I appreciate that the appellant has fixed costs of that business so that, if he wishes to continue it, at present he subsidises the business from his pension income.  However, the relevant provisions of the regulations do not permit such trading losses to be set off in the way which he wishes.

17.	The appellant had another point which he raised to the tribunal.  He states that a considerable sum of money, which came from his redundancy payment, was taken from their joint account by the second respondent without his permission;  that this both gives more money to the second respondent, such that she has a reduced need for child support maintenance and also decreases his own ability to fund both that maintenance and certain of his own “fixed” personal expenses.  The tribunal held that its only jurisdiction was limited “…to deciding whether the assessment fixed by the decision under appeal was correct under the applicable statutory provisions”.  When the Commissioner granted leave, he limited such leave to the issue of offset only.  Technically, therefore, the matter is not before me in this appeal.  

18.	However, even if it were, and even if what is asserted by the appellant is correct, (which I do not, of course, determine in present circumstances, as I have not heard from both sides on the point), the tribunal was right not to deal with the contention;  it would have been preferable though had it explained itself more fully.  There is simply no provision under the Child Support legislation which allows consideration of such circumstances, (as distinct from a voluntary transfer of capital made in response to the child support maintenance application), so that there was accordingly no statutory basis on which a tribunal could alter a maintenance calculation even if (which they may or may not be) the assertions made are accurate.  The appellant’s only redress is through judicial action.  I respect his stated reasons for not wishing to pursue this;  but the point is that the statutory child support scheme, wide in ambit though it is, provides no appropriate way in which the allegation of theft made can be factored in when assessing child support maintenance.

					(Signed)
					L T PARKER
					Commissioner
					Date:  5 June 2008